May 25, 2011

At times, it has seemed like this blog should be called "Medical Specials Recovery Blog." CBL has blogged many times on this question: "Just what does a personal injury plaintiff get when her medical bills are $200,000 but the hospitals and doctors have deals with the insurance companies, Medicaid (or MediCal as we Californians call it) or Medicare to take a whole bunch less as payment in full?" Some of the previous posts are here, here, here and here.

Well, yesterday the Cal Supremes heard argument on the question. CBL's colleague Georges Haddad attended the argument, and here, in a guest post, are his summary and tea-leaf reading:

Defendant Hamilton's truck driver crashed into Ms. Howell, causing severe spinal injuries that required treatment at two medical facilities. At each medical facility, Ms. Howell signed agreements that she would be responsible for the medical charges – standard hospital contractual language. The parties stipulated at trial that the amount of medical expenses billed was $189,824.68.

The jury awarded Ms. Howell the full stipulated amount as past medical expenses. Post trial, Hamilton moved pursuant to Hanif v. Housing Authority of Yolo County to reduce the awarded to the amount paid by Ms. Howell’s insurers - $59,537.78. Hamilton supported its motion with declarations from the two treating facilities that showed Ms. Howell no longer owed them money. The trial court granted Hamilton’s motion and reduced the award from past medical expenses to the amount paid by Ms. Howell’s insurers. The Court of Appeal upheld the trial court.

The Supreme Court framed the issues presented as follows:

(1) Is the “negotiated rate differential” – the difference between the full billed rate for medical care and the actual amount paid as negotiated between a medical provider and an insurer – a collateral source benefit under the collateral source rule, which allows plaintiff to collect that amount as economic damages, or is the plaintiff limited in economic damages to the amount the medical provider accepts as payment?

(2) Did the trial court err in this case when it permitted plaintiff to present the full billed amount of medical charges to the jury but then reduced the jury’s award of damages by the negotiated rate differential?

In answer the first questioned posed, I believe that a divided court, most like lead by Justice Kennard or Chin, will answer the question that a plaintiff is entitled to the amount the medical provider accepts as payment. As defined by the court, the “negotiated rate differential” is never incurred by the plaintiff, and therefore is not recoverable as damages

Planitiff argued that there are situations, such as with a person who is uninsured, where there is no negotiated rate available for determination and therefore the reasonable cost for the services may be examined to ensure that there is no “windfall.” Noting that no two plaintiffs are alike, counsel for the defense argued that in the case of the uninsured, the damages would still be the amount paid or accepted as satisfaction by the medical facility.

The justices seemed to agree that the collateral source rule survives the defendant's proposed approach, since judgment is not reduced by the sum contributed by a third party. When an insurer pays $50K on behalf of the plaintiff for a procedure that can cost $100K, the damage to the plaintiff is still $50K. Because the $50K was paid by the plaintiff’s insurer, it cannot be deducted from the judgment under the collateral source rule.

As to the second question, the Justices barely touched on the subject, other then Justice Corrigan, who questioned whether the case should be sent back to the trial court with instructions.

May 10, 2011

Many of CBL's clients favor binding arbitration of disputes, and since CBL's clients are very wise and always right, he tries to see to it that the clients who want and have a right to arbitration get it. But as he has expressed before, CBL is not without his doubts. Most civil cases involve two key elements: liability and damages. In a case where the trier of fact finds liability and has to decide damages, here are some choices: Federal Court, where the plaintiff has to convince a unanimous jury of six of the amount; State court, where nine out of twelve jurors have to be convinced; Bench trial, where one person decides, but at least there are rights to appeal; and binding arbitration, where one person decides, and when it's over, it's over. Runaway arbitrator? Too bad -- there's very little opportunity to appeal.

Let's consider, for example, the case of Shahinian v. Cedars-Sinai Medical Center (Second Dist., April 27, 2011) ___Cal.App.4th ___ (B223366). Dr. Shahinian was a big deal brain surgeon. He had a contract with the hospital requiring binding arbitration of disputes. He started griping that the hospital wasn't adequately cleaning or sterilizing his surgical instruments, so they had bioburden on them. (His definition of bioburden was quite a bit grosser than the medical dictionary's -- don't read Footnote 1 of the opinion unless you want to know.) The hospital took various actions limiting his ability to perform surgeries.

They went to arbitration. The arbitrator found the hospital guilty of all kinds of tortious misconduct and contractual breaches and awarded about $2.1 million in compensatory damages and a tad less than $2.6 million in punitive damages. And the hospital went back to the trial court and said -- "hey wait a minute, under State Farm Mut. Automobile Ins. Co. v. Campbell (2003) 538 U.S. 408, 416-419, the ratio between punitives and compensatories shouldn't generally be more than 1 - 1. And we want our extra half a million bucks back.

To which the Court of Appeal said: Nope. State Farm doesn't apply to contractual arbitration. State Farm sets a Constitutional limitation on state action. But contractual arbitration isn't state action.

If this is true, an arbitrator could award a dollar in compensatories and $100 million in punitives, and the defendant couldn't do a thing about it. So I think I'm going to stand by my position: Binding arbitration? No thanks.